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Qantas takes low cost Asia stake


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Qantas CEO Geoff Dixon calls the new investment "modest".

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(CNN) -- Australian flag carrier Qantas is to become a major investor in a new low-cost airline based in Singapore.

Qantas is joining forces with two prominent Singaporean businessmen and Temasek Holdings, an investment arm of the Singapore government.

Between them, they will invest S$100 million (about $60 million) in the as-yet unnamed airline, with Qantas contributing S$50 million.

Qantas CEO Geoff Dixon said in Singapore Tuesday that the airline would begin flying before the end of 2004 with four aircraft, building to a fleet of more than 20 planes over the following three years.

Dixon said the airline would operate either Boeing 737-800s or Airbus A320s to Asian cities within five hours' flying time of Singapore.

He said Qantas would own 49.9 percent of the airline, with 21.1 percent held by Singapore businessman Tony Chew, 10 percent by another businessman, F.F. Wong, and 19 percent by Temasek.

Chew is chairman of Del Monte Pacific and Asia Resource Corporation, and a director of Keppel Corporation. Wong, now chairman and CEO of Boustead Singapore, was managing director of Myanmar Airways International from 1992 to 1998.

Government-owned Temasek already holds a 56 percent controlling stake in Singapore Airlines, which in turn owns 49 percent of Tiger Airways, a new low cost carrier due to start flying later this year.

Temasek also holds 68 percent of Singapore Telecommunications, and has stakes in other key Singapore enterprises in fields that encompass shipping and logistics, banking and financial services, power and utilities, and telcoms and media.

Singapore Airlines and Qantas are regarded as two of the strongest carriers in the world, despite suffering a traffic downturn in 2003 from the outbreak of war in Iraq and the impact of SARS.

Dixon called the Qantas investment in the new airline "modest", but said it represented an excellent opportunity to participate in the growing intra-Asia travel market.

Tuesday's investment announcement puts an end to speculation that Qantas might take a stake in Malaysian low-cost carrier AirAsia, run by Tony Fernandes.

But Virgin Blue, which competes with Qantas in the Australian market, is still regarded as a potential investor in AirAsia ahead of a public float.

Qantas has set up its own domestic discount airline JetStar to combat the challenge from Virgin Blue. JetStar begins flying in Australia next month.

The Qantas leisure carrier Australian Airlines, launched in October 2002, also flies to Asian destinations.

Shares in Qantas closed 1.1 percent lower at A$3.54 Tuesday.

Regional aviation consultant the Center for Asia Pacific Aviation said in a report last month that the coming generation of low cost airlines in Asia represented a "remarkable opportunity" for national carriers.

It said the new model of low cost, point-to-point carriers was shaking up "complacent" flag carriers, making them more efficient and helping them stimulate traffic growth.


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